After a prolonged drama European telecom giants Deutsche Telekom (DT) and France Telecom (FTE) have officially merged their UK operations in a 50-50 joint venture. This follows the recent approval from the European Commission, the executive body of the European Union (EU), and other necessary regulatory clearances.
The management structure of the combined entity has been announced. The former chief executive of Orange UK will be the CEO of the integrated company while the former T-Mobile UK CEO has been designated as the Chief Financial Officer and deputy CEO. While the companies are likely to retain the Orange and T-mobile brands for now to prevent customer defection, a new brand, however, is expected within two years.
The merger (announced in September 2009) faced the possibility of an investigation in February 2010 by the UK antitrust watchdog Office of Fair Trading (OFT), which sought European Commission’s permission to scrutinize the deal as consumer groups expressed concerns about its impact on the competitive scenario in the UK mobile market.
However, the commission agreed to clear the merger as France Telecom’s UK unit Orange UK and Deutsche Telekom’s British subsidiary T-mobile UK agreed to surrender a portion of their combined 1,800 megahertz (MHz) broadcast spectrum (radio airwave) in the UK to speed up the regulatory approval of their proposed joint venture.
The merger has radically changed the competitive landscape in the British mobile market. The combined entity has now dethroned Telefonica’s (TEF) UK subsidiary O2 UK (roughly 28% market share) as the largest wireless operator in the UK with a 37% market share and a cumulative subscriber base of approximately 28.4 million. Vodafone (VOD) remains third with a 25% share.
Moreover, the combination of T-mobile and Orange’s network assets is expected to create significant cost synergies which may exceed €4 billion ($5.7 billion), mostly through reduced operating and capital expenditure.
The consolidated entity with greater scale, larger markets and distribution network will operate and compete more efficiently while sharing the expenditure associated with future network upgrades.
Read the full analyst report on “DT”
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Read the full analyst report on “VOD”
Read the full analyst report on “TEF”
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